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Risk Tolerance & Time Horizon are the keys

Vijaianand — Thu, 16 Feb 2012 17:14:17 +0000

As a Self directed Investor many of you are very much aware of the fact that Risk plays a key role in your investment return. If you are novice investor, you know in general terms more return needs more risk. It always the fight between Risk versus Return. Investors has to get their act together to find a balance between the level of risk they are willing to take in order to get a reasonable return for their investment.

Image credit: investopedia.com

The investing strategy decisions shouldn’t be only based on Risk tolerance but also accompanied by another factor, Time. Time Horizon is second major factor to drive your financial planning decisions. Even though there are other factors involved in financial planning, these two factors Risk Tolerance and Investment Horizon are key to achieve your financial goals.

Risk Tolerance
Risk tolerance is all about how much risk one is willing to take to achieve expected return. As many theories explain, high return needs high risk which is associated with high level of uncertainty. But if you are satisfied with low return, low risk with low uncertainty would be the way to go. It is the argument about whether to put the money in savings, CD’s, Bonds Versus Equities. The simple chart below shows clearly that as the risk increase return increase and vice versa.

The starting point of the line is where one can get risk risk-free rate of return which normally associated with US Securities like Treasuries and Bonds. There is no risk associated with these type of investing to get low rate of return as US securities never defaulted. As you diversify your investment by investing in equities like stocks and Mutual funds, your risk increase as well expected return increase. Risk tolerance level changes depending on one’s age and financial goals. If you are 30 and planning to invest for retirement, your risk tolerance is high compared to one approaching retirement. That brings up to second key factor, Time Horizon.

Time Horizon
In above example, 30 year old has more time to build the wealth needed to reach the goal by taking more risk compared to one approaching the retirement. Taking the Risk tolerance level and combining with time horizon would lead to various asset allocation strategies which can be implemented depending on your financial goals. See the below chart.

Risk Averse Investor
It is good to take high risk to get expected returns but if you have two investments with similar returns but varied risk. It is wise to go with low risk investment. These type of investors are called Risk Averse Investors. As per Modern Portfolio theory, risk-averse investors try to construct portfolios to maximize their expected return based on a given level of market risk. Don’t try to over smart the market, try to be Risk Averse Investor to achieve your financial goals smartly.

Investment Tools
You don’t have to be expert investor or financial geek, there are lots of tools available these days for ordinary consumers. In recent past few years, many veteran mutual fund companies like TRowePrice, Vanguard and small fund companies which serves more online clients like Betterment.com, Funds.com have built their own tools based on these two main key factors. These tools simply drive the customers to make a decision on which funds to select by setting their risk tolerance level and time horizon. It is the simplest way to start investing for your future financial goals.

In conclusion, always try to remember that right amount risk level and proper time period is driven by your financial goals and helps to implement efficient investment strategies to reach your financial well being.

2012 ShareBuilder Discount & Bonus offer for Costco Members

Vijaianand — Fri, 03 Feb 2012 18:45:40 +0000

In the past, Costco partnered with INGDirect Sharebuilder to offer sign on bonus for their members. It was usually $50 for GoldStar Members and $90 for Executive members. I have signed to make use the offer 3 years ago and I been using sharebuilder on and off for my dollar cost average investment strategy.

Last year offer ended on Jan 31st, so they came up with the new offer which is not the same but little bit better to motivate investing more and take advantage of the discount. For All Costco Members, whether New or Existing Accounts at ShareBuilder.com,
Savings Highlights*

$2 automatic investments
$6.95 to trade now

With that, only for Executive Members, the sign up bonus would be $50.

Compare the Savings

Basic Program	ShareBuilder Price	Costco Member Price	Savings
Trade Now	$9.95	$6.95	30%
Automatic Investments**	$4	$2	50%
Options Trading	$9.95/online trade +$1.25/contract	$6.95/online trade +$1.25/contract	30%

If you are setup automatic savings investment, you will only spend $2 compared to $4. For Regular trade, you will pay $6.95 which equal to Scottrade commission price and better than other discount brokers. You will either way. I would say it is good offer to start your dollar cost averaging and start investing passively.

For more info, you can visit sharebuilder.com/feb2012

Clover – Pay by Phone Payment service – Signup Bonus

Vijaianand — Thu, 26 Jan 2012 13:43:03 +0000

With the advancement of smart phones, there are many apps which emerged to take advantage of the technology to provide consumers with tools that made their life easier as well bit app oriented. One of the new entry to the pool is Clover, a Payment service from phone. The phone payment service has been around for a while and used in Europe, Africa and South Asian countries but not caught up in USA a lot. It looks like clover is trying to get into unplugged market and seriously marketing to get new customers to try out. For that reason, they have introduced promo to give $5 Amazon card for any new signup through referrals.

To simply put, Clover is a person-to-person payment system for use between phone numbers. They don’t charge fees for personal user but business accounts gets charged some minimal fee. They support both iphone and Android phones with nice and smooth interface. Sign-up via this invite or through any registered user, you’ll receive a $5 bonus of $5 Amazon GC + $1 credit to the account The referrer also gets $5 too.

Usually you don’t even need a credit card or bank account to start, just a phone number to get the credit but due to high demand they are putting people to waiting list. If you want to get the $5 bonus, I recommend you to add a gift card or prepaid credit card to the account by upgrading to Gold membership and you will immediately receive the code. Referral is limited so hurry up and sign up. If you signed up, don’t hesitate to share your referral link here so others can use your link as well. Thanks to my favorite money blogger at mymoneyblog.com who brought this to my attention.

Here is the referral link again. Don’t lose this free money.

Young Adults – The Beaten Generation

Vijaianand — Tue, 24 Jan 2012 19:19:40 +0000

Picture speaks better than thousand words. That’s the reason I been wanting and searching for the digital copy of this image in money magazine website for couple of days. You would think they would publish the digital version but not really or atleast I couldn’t able to find after searching for 2 days now. Anyway, here is the scanned version for you all to look and take a holistic viewpoint.

One of the largest group of audience affected by the recession were Young Adults particularly college grads. Many grads are extending their college days just to avoid jumping into the unemployment pool now. They are hoping things will get better eventually and days will come when we will be able to find jobs quickly. But that sunny days are still long way to go.

Many grads leave their college with the heavy debt burden and lives with their parents until they find a decent job. Their trouble cycle starts right after they exit their college. They need to start making student loan payments. So they need to find a job to support them and pay loan as well. They couldn’t find decent job in this economy, so settle for low income which leaves small amount after loan payment. This is the situation for the last few years.

Many analyst predict it has a greater impact with cascade effect on to our society. As the grads settle for lower income, it takes many more years for them to reach the income respective to their skill set. Until that point many cannot even think about marriage. So it increase late marriage numbers which will eventually screws the new birth numbers in our society. That’s already started to happen and graphics above clearly depicts the impact so far. If this trend continues, it will impact the proportion of older and young adult numbers in our country sometime soon which will larger effect on our economy. This is the case with china which is fighting against large older population. As you can see, no one worries about that macro economics part right now because we have bigger and more important fishes to fry especially how to get over this crisis and make our living.

Understandably it’s tough to see the long term impact while we are struggling currently with lots of issues. But now and then we have to stop and take time to look and make changes if we can for the benefit of our kids/future generation. That’s my take.

Tax year 2012 – Important Inflation adjustments

Vijaianand — Fri, 06 Jan 2012 18:30:46 +0000

Happy New year to everyone.. I hope this year bring a reasonable amount growth and prosperous to our country and everyone’s life as well.

Let me start this year with blog on the update about IRS inflation adjusts on various tax items. Usually every year the Internal Revenue Service adjusts for inflation tax brackets, tables, exemptions, thresholds and other items. In recent years these annual adjustments have been minimal because inflation has been very low. This pattern holds true for 2012. Here are the major adjustments for 2012:

The value of each personal and dependent exemption, available to most taxpayers, is $3,800, up $100 from 2011.
The new standard deduction is $11,900 for married couples filing a joint return, up $300; $5,950 for singles and married individuals filing separately, up $150; and $8,700 for heads of household, up $200. Nearly two out of three taxpayers take the standard deduction rather than itemizing deductions, such as mortgage interest, charitable contributions, and state and local taxes.
Tax-bracket thresholds increase for each filing status. For a married couple filing a joint return, for example, the taxable-income threshold separating the 15 percent bracket from the 25 percent bracket is $70,700, up from $69,000 in 2011.
For an estate of any decedent dying during calendar year 2012, the basic exclusion from estate tax amount is $5.12 million, up from $5 million for calendar year 2011. Also, if the executor chooses to use the special use valuation method for qualified real property, the aggregate decrease in the value of the property resulting from the choice cannot exceed $1.04 million, up from $1.02 million for 2011.
The annual exclusion for gifts remains at $13,000.
The amount unearned income of minor children that is not subject to the so-called “kiddie tax” remains at $950.
The annual limit for Section 179 expensing, which businesses can use to deduct the cost of new business equipment in a single year, has been reduced to $139,000 (down $361,000 from 2011). The $139,000 limitation is reduced (but not below zero) by the amount the cost of Section 179 property placed in service during the 2012 taxable year exceeds $560,000.
401(k)/403(b)/457 contribution limit: $17,000 (up $500 from 2011).
The income limit for full Roth IRA contributions for 2012 is $110,000 for singles and $173,000 for joint filers (up $3,000 for singles and up $4,000 for joint filers from 2011).
The monthly tax-free parking benefit employers can provide their employees for 2012 rises to $240, up $10 from the limit in 2011.

For more detail listing on other items, please visit IRS.org

Happy New year 2012 – Send off and Celebrate

Vijaianand — Thu, 29 Dec 2011 19:39:15 +0000

It’s hard to believe that 2011 is already drawing to a close. It has been a great year with unexpected turns and bounces and surprises and made it interesting. For me, it started out with a surprise of passing my Certified Financial Planner(CFP) exam. I am happy to be part of 50% hard working and lucky people to passed in USA. I also got my Realtor license in March and started helping as a Realtor. I was able to work with many first time buyers on their dream home and veteran investors to find a good deal on their investment properties. I enjoyed every moment of it. Overall, it has been good year and it’s going to end with a great note. I achieved most of my goals for this year especially my Realtor goal, closing atleast 10 deals this year. I am really happy about it and hope to continue this stride next year as well.

With that good note, I like to say “Thank you” to everyone who encouraged and helped to achieve my goals. I extend my warmest wishes for a safe, joyful and prosperous 2012.

As many of you know, I am a strong believer of Good Thoughts attract good things. I also put lessons learned from The Secret Book into practical use. It helps me to think positive about future. I hope 2012 will make some positive impacts to everyone. I also encourage you to Check out the secret.tv intro (20mins) which talks lot of Law of Attraction and how you can also think positive about your future.

Wishing you & yours a Happy New Year!

Charitable Giving is Good for you & for your Taxes – Tax deductible contributions

Vijaianand — Fri, 23 Dec 2011 17:48:59 +0000

I am a big proponent of Charitable giving. I raise funds at this time of year to sponsor and support few kids education back home in India. I always like to follow the proverb, that what you give from one hand shouldn’t be known to the other. But at the same time, its not always easy to do that. You sometimes have to push yourself to give and as well take advantage of that giving. As author says in the “The Secret” book, give more to get more. I know it might seem like selfish but some people need that push to start giving. Giving is all about you and your inner feeling but when it comes to money it also become a tax matter. As CFP passed, I studied lot about how to take advantage of giving and taking tax deductions to avoid tax all at the same time.

Whom to give and get tax deductible?
This is the time for giving. If you haven’t started giving, its never too late. There are lots of charity organization like Sheltering Arms, Red Cross and many local organization like food banks who are willing to accept your contribution. But in order to get tax deductible, you better follow the IRS rules.

However, only contributions to “qualified organizations” are deductible. You can ask any organization whether it is a qualified organization, and most will be able to tell you. They should have an IRS letter saying so — you can ask for a copy. You can also check the lists of most qualified organizations from IRS publication. You can also visit the website http://www.guidestar.org, which lists 1.5 million qualified charities and contains in-depth financial information about them as well.

How much is deductible?

It all depends on what type of giving. Whether it is cash, real property or non-real property like stocks and bonds. There is limit for each type and there is also overall limits on how much you can deduct each year as a charitable deduction. Specific limits vary according to whether you give cash or property, but the overall limit is that your charitable contributions cannot exceed 50 percent of your adjusted gross income for the year. Any contributions you make over this amount may be carried forward to the following year and deducted then. You can keep carrying forward any remaining amount for up to five years.

How to Report to IRS?

Depending on the type of property, you need to keep proper documents to support your giving and claim in the tax return for that year. Otherwise you could end up losing legitimate charitable deductions if you’re audited. You need to have a canceled check, account statement, receipt or other record for cash donations under $250, and an acknowledgment from the charity for donations over $250. For other property types, you need additional forms to be filled and authorized by the charity organization. Visit IRS.gov to get more information.

In conclusion, whether you like it or not you have an option to take advantage of your givings to charity. Some people make it a Tax advantage strategy to give to charity every year and claim it as deductions but some just give and never bother to take advantage. Whatever it’s your style, just don’t forget to give, giving always gets you more.

Specials Deals and Holiday Offers – Update

Vijaianand — Thu, 15 Dec 2011 20:59:59 +0000

Buy 3 Subway $10 Giftcard and 3 $25 value Restaurant.com gift card for only $35.90

Restaurant.com has special which was going on for the past few days. They claim it has $105 value for $36 buck, saving $70 bucks. But the truth, you can buy Restaurant.com gift cards for $4 each so its only $6 saving for 3 cards and subway cards are paid for the same value. It is not whole lot of saving but something is better than nothing right.

Free $20 for Signing up New American Express Serve Account

American express has come up with paypal type of money transfer service called Serve and they are trying to market it with freebie. When you sign to their open an account, they will credit you with $10 bonus. You gotta to enter your last 4 digit of SSN and they will also ask you to send a proof like copy of DL, bank statement to verify it. If you want to give them to receive free $10 go ahead.

Also they created a trivia game to attract people called Playmoneymover.com where they are giving away another $10 for playing the game which is not really tough. If you even miss a chance to get it right, you have another chance to try again and again. I only got it at the 3rd try and hope to see the $10 in my serve account. I plan to withdraw these free $20 as soon as they are in my account by connecting my bank account. Let see how it plays out.

Thanks to mymoneyblog.com for the free bucks info.

My Blackfriday Gadget Pick for 2011 – Toshiba Thrive Tablet with HoneyComb 3.1

Vijaianand — Fri, 09 Dec 2011 18:27:34 +0000

I am usually not an early adapter of electronic gadgets. I like to wait out and watch the market and decide my purchase depending on the acceptance and longevity of the tool. I don’t like to be first one to stand in line to get their first Ipad or IPhone. That’s just not me. The real reason behind it, I am not too crazy about gadgets unless I really need them. That’s why I took enough time to figure out the better tablet for our need not just for the sake of having one.

Requirement
Like any purchase, I usually list down the need and real objective of the tool and goal its going to accomplish. For tablet, I was thinking like we have a laptop which I recently bought and why do we need a tablet. I need one to check and reply emails quickly instead of booting my laptop every time, check on some business websites while talking to clients over the phone, quickly upload photos from my camera to websites and finally want to hook up to my HDTV to watch movies. That’s just my quick list. Obviously not to mention my wife would like to check out internet for cooking videos and my son(5 year old) would love to play his Angry bird game on a bigger screen than iphone.

Research
After researching for almost 3-4 months and checking out prizes, I finally decided to go for Toshiba Thrive. Why not Ipad? Because I don’t want to depend on laptop or desktop to transfer my files from and to tablet. Tablet has to work independently like mini-laptop. IPAD doesn’t have HDMI port, no SD and USB port for quick photo transfers. It is expensive as well. It is out of my list. Other tablets like Galaxy Tab, Motorola XOOM all are good and sleek but bit expensive and doesn’t support lots of ports which I was looking. Acer Iconoia and Azus Transformer, they were on the final list but Toshiba scored it because of his reputation and reviews.

Result – My Pick
It has been few weeks since we got the tablet. We all got good use of it so far. I installed decent apps, upgraded to HoneyComb 3.2 without much hazzle and has short learning curve to pick up on Andriod. I downloaded few free books from Amazon, watched movies plugged to my HDTV. My wife uses for chatting, quick internet check and watching cooking videos. My son not only plays but also uses to do his homework on websites. I was able to easily transfer video and audio files back and forth from different machines to tablet without need of software/tool.

Check out the below video about a quick preview of the tablet,

In conclusion, I would say we all love it so far. Since I got it on sale for $309 (16GB), its worth the money and hope it will be a handy tool for us for couple years. It will for you if you are looking for all the different ports without paying big bucks. Unless you are diehard Apple phone, I would really recommend to give Android and Thrive a try!!!

Holiday Offer – $5,000 Cash & Two iPads Giveaway

Vijaianand — Thu, 08 Dec 2011 17:22:17 +0000

One of my favorite money blogger is giving away $5000 cash and two ipads for lucky winners on the christmas drawing. It is real easy to get in the drawing. Just subscribe for his RSS feed and take a survey which only takes 30 secs. If you are lucky person, you would get an IPad or $5000 cash to spend for this christmas.

Why not try out your luck? It is better than buying a state lottery ticket.

Check out for more details at mymoneyblog.com